On the heels of a StatsCan report indicating that all boomers will be eligible for retirement within the next 20 years, a BMO Retirement Institute poll finds that only 48% of boomers are prepared for retirement.
This means that less than half are planning or have already discussed their post-retirement income strategies with a financial advisor, including how they will structure their investments and plan for financial contingencies.
Longevity risk is not even on the radar for two-thirds of respondents, who have given no thought to the possibility of outliving their savings, despite increased life expectancy among the Canadian population.
“Living off of retirement savings is different than saving for retirement. As Canada’s boomers draw closer to their retirement years, having a strategy to manage investment income throughout retirement should be a top priority,” says Tina Di Vito, head of the BMO Retirement Institute. “Financial resources available through programs such as the Canada Pension Plan and other pension schemes likely won’t be enough to support the average retirement lifespan. The onus is on individuals to be prepared in order to live out their desired retirement lifestyle.”
Di Vito explains that boomers must shift their focus from saving for retirement to retirement income planning in order to make insure their investments will support their desired retirement lifestyle.
“A fundamental element to successful financial management is to ensure strategies are aligned properly with current life stages,” says Di Vito. “Those in the 55-65 age range may need to restructure their investments, develop financial contingency plans and possibly make course corrections to their overall portfolios.”
BMO offers boomers the following advice:
Understand employer and government pension plans: While employer sponsored pension plans are becoming increasingly rare and government/public pension programs only provide a basic level income, it is important that people understand what they are eligible to receive and factor it into their investment savings strategies.
Plan for taxes on RRIF withdrawals: Withdrawals from Registered Retirement Income Funds (RRIFs) are taxed as interest/salary income. Canadians must take this into account when creating post-retirement plans to avoid unpleasant surprises.
Plan ahead: Those with retirement on the horizon may need to restructure their investments, begin framing financial contingencies and creating monthly budgets in order to adapt with ease to a new financial reality. BMO advises retirement-bound boomers to speak with a financial advisor ahead of the game to ensure the proper adjustments are put in place.
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